on 9 July 1999
ITEM FOR FINANCE COMMITTEE
CAPITAL WORKS RESERVE FUND
HEAD 701 - LAND ACQUISITION
HEAD 91 - LANDS DEPARTMENT
Subhead 221 Clearance of Government land - ex-gratia allowances
Ex-gratia allowances for slipways arising from clearances
Members are invited to approve a change to the basis on which ex-gratia allowances in respect of slipways affected by clearances are calculated and to note the financial implications arising from the change.
The present basis for calculating ex-gratia allowances (EGAs) in respect of slipways affected by clearances does not take account of the portion of the slipway beneath the low water mark. Disagreement over such an approach by prospective clearees has been an impediment to clearances.
2. We propose that, with immediate effect, the calculation of EGAs in respect of slipways affected by clearances should be based on the total area of the slipways. The area in each case should be established by actual measurement.
3. We further propose that the prevailing EGA rate applicable to the portion of slipways above the low water mark on the day of assessment shall apply equally to the underwater portion.
4. Arising from the clearance of shipyards to be carried out in North Tsing Yi, we have received representations from affected shipyard operators that the current basis of calculating EGAs for slipways subject to clearance is inequitable. The reluctance of the operators to be cleared has caused a delay to the construction of district open space on the sites to be cleared. We have reconsidered the basis on which EGAs for slipways are calculated.
5. The existing rationale is based on the premise that only the above-water areas could be counted as working areas. While it is noted that only the above-water portion of a slipway is actually used in transporting a vessel from the water to the land and vice versa, the above-water portion cannot function without the underwater portion. Since a slipway is part of the essential infrastructure of a shipyard without which the shipyard cannot operate, we consider that it would be logical and equitable to calculate EGAs on the basis of the entire structure. We therefore propose that the underwater portion of a slipway should be taken into account in calculating EGAs for shipyards subject to clearance.
6. On 11 June 1999 we proposed to Members vide FCR(1999-2000)19 that the calculation of the EGAs payable for the underwater portion of slipways should be based on a ratio of 1:1 in respect of the length of the portion of the slipways above and below the low water mark. The adoption of a ratio was considered to be administratively simple and was based on Marine Department's advice that during a low tide situation, the ratio of the above-water portion to the below water portion is generally about 1:1. Such a ratio would thus be a reasonable basis for calculating the EGAs. Shipyard operators however claimed that the length of the underwater portion of certain slipways could be greater than that of the part above water and there was no substantive basis for the proposed 1:1 ratio. Consequently, the proposal was not accepted by Members.
7. In the light of the above, we consider that the most objective basis for determining the calculation of the EGAs for slipways would be the actual measurement of individual slipways of the affected shipyards. We will do this by conducting bathymetric surveys to ascertain the position and areas of the underwater portion of the slipways such that the total length and areas of the slipways can be worked out. As the ratio of the length of slipways above and below the low water mark can vary from shipyard to shipyard, individual slipways may have ratios greater or less than 1:1. The EGA calculation based on actual measurement with a scientific means will remove any dispute in individual cases. However, as the measurement of the upper and lower parts of the slipways will need to be carried out separately by the Housing Department and the Civil Engineering Department, the revised proposal will be more time consuming and costly to administer than the original proposal.
8. With regard to the actual amount payable, we propose, as a general rule, that the EGA rate for the underwater portion of a slipway should be the prevailing rate for the above-water portion on the day the area of the slipway is assessed. In this context, Members are asked to note that the EGA rate is adjusted periodically, and in a few cases, offers have already been made in respect of slipways yet to be cleared, based on the above-water portion of the slipway only and payable at the rate prevailing at the time of the assessment. Where this rate differs from the current EGA rate, we propose that the rate applicable to the underwater portion of the slipway in such cases should be that applicable to the above-water portion on the day of assessment, for the sake of consistency.
9. It is difficult to quantify precisely the financial implications arising from the proposed change as these will depend on the number of shipyards to be cleared in future and the actual dimensions of the slipways involved.
10. As an indication of the potential order of costs involved, we believe the amount of additional EGAs payable for the clearance exercise mentioned in paragraph 4 above will be around $4.0 to $4.5 million under the revised proposal. The costs of the measurement work to be undertaken by the Housing Department and the Civil Engineering Department will be absorbed within the existing resources of these two Departments.
11. EGAs for slipways subject to clearance will be paid from the Capital Works Reserve Fund Head 701 Land Acquisition in the case of clearances relating to projects in the Public Works Programme and from the General Revenue Account Head 91 Lands Department Subhead 221 Clearance of Government land - ex-gratia allowances in the case of non-development clearances.
12. On 31 October 1973, the Finance Committee (FC) of the Legislative Council approved a proposal to pay EGAs in respect of the covered areas of industrial undertakings affected by clearances.
13. On 8 December 1976, having considered that some industrial undertakings such as shipyards operated mainly in the open, the FC agreed that EGAs should also be paid in respect of open areas including slipways. Though slipways are uncovered areas the relevant EGA was set at the same level as that for covered areas to reflect slipway construction costs. However, the areas which qualified for EGAs were restricted to the areas of the slipways above the low water mark. The rationale at the time was that only that above-water portion of a slipway would qualify as working area and should therefore be eligible for ex-gratia payment.
14. On 28 July 1982, the FC approved a proposal to limit the rate of EGA in respect of slipways at half of that for covered working areas on the ground that slipways fell somewhere between covered and open working areas. The current rate of EGAs for areas of slipways above the low water mark is $740 per square metre.
Planning, Environment and Lands Bureau